The Palo Alto City Council is challenging a proposal by the Metropolitan Transportation Commission to forgive a $91 million loan to a project that would extend BART to the South Bay.

The funds were borrowed from the languishing Dumbarton Rail project, which would link the East Bay and Peninsula via a rebuilt rail bridge just south of the Dumbarton Bridge.

The Dumbarton Rail project and the project to extend BART from the existing Fremont station to the city's Warm Springs district both received funding from the Regional Measure 2 program. Passed by voters in 2004, the measure raised the toll on seven state-owned bridges in the Bay Area by $1 for the purpose of funding projects to ease congestion.

The council voted unanimously early Tuesday morning to send a letter to the MTC asking that part, if not all, of the loan be paid back. Councilman Pat Burt said the funds should be spent on projects that directly benefit the Peninsula.

"I think that we should push that point," he said. "We're probably not going to turn them around, but this lays the groundwork for next year's request and then to rally Peninsula cities around a common position."

The proposal from the MTC seeks to reallocate funds for projects that are not moving forward as planned. The Dumbarton Rail project has been in limbo since 2012, when voters in Alameda County narrowly rejected a sales tax measure that would have provided up to $120 million for the project, which according to some estimates could top $700 million.

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In addition to forgiving the loan, the MTC has suggested allocating $20 million for the Caltrain electrification project and $14.7 million to expand the Dumbarton Express bus service. The council indicated it was in favor of both.

But the money that was loaned, Burt said, could be used to lengthen platforms at Caltrain stations to accommodate the longer and more frequent trains that will result from the electrification project.

"I bet $91 million would help go a long ways on platform lengthening," said Burt, adding that Caltrain abandoned the idea due to a lack of funding.

Palo Alto resident Richard Brand was among a handful of public speakers who urged the council to oppose forgiveness of the loan.

"I think that we need to protest this -- what I call theft of the money that was allocated to this important link," he said about the Dumbarton Rail project.

Friends of Caltrain's Adina Levin said if funds are removed from one project they must be spent on another in same transit corridor.

"There is going to be more need for Dumbarton transit in the future," she said. "Having the cities in our region stand up and say we're going to need this ... will be helpful."